Canoo Reports Substantial Loss in 3Q 2021, Still Rallies
On November 15, Canoo Inc. (NASDAQ: GOEV), a start-up electric vehicle (EV) manufacturer, reported substantial 3Q 2021 net income and cash flow deficits, yet the market applauded the results, as it has for virtually any EV news, bad or good, over the past month. Canoo reported a US$107.0 million operating loss and a US$71.8 million operating cash flow deficit in the quarter, each figure sequentially worse than US$104.3 million and US$54.9 million losses, respectively, in 2Q 2021.
The constructive news in the report was that Canoo plans to begin production of its Lifestyle Vehicle before 4Q 2022. The company had previously estimated a 4Q 2022 manufacturing start date. In some 2021 presentations, Canoo projected that 15,000 units would be made in 2023, but the company did not make any numerical commitments in the 3Q 2021 earnings release. The Lifestyle Vehicle’s targeted starting sales price is US$34,750 to US$49,950.
The key issue facing Canoo is its rapidly accelerating cash burn rate. In 3Q 2021, the company’s cash burn (defined as its operating cash flow deficit plus capital expenditures) totaled US$143 million, up from US$71 million in 2Q 2021, and US$66 million in 1Q 2021. Canoo projects cash operating expenses and capital expenditures in 4Q 2021 of US$95 – US$115 million and US$60 – US$80 million, respectively, so its 4Q 2021 cash burn could total US$155 – US$195 million.
By year-end 2021, the company’s cash balance could therefore be down to around US$250 million versus US$415 million at September 30, 2021 and US$702 million at year-end 2020. Phrased differently, Canoo’s full-year 2021 cash burn could amount to US$450 million. The company seems to need to raise additional equity by the end of the first quarter of 2022.
| (in thousands of U.S. dollars, except for shares outstanding) | 4Q 2021E | 3Q 2021 | 2Q 2021 | 1Q 2021 |
| Operating Income | ($95,000) to ($115,000) | ($107,006) | ($104,346) | ($97,070) |
| Operating Cash Flow | ($71,803) | ($54,870) | ($53,948) | |
| Capital Expenditures | ($60,000) to ($80,000) | ($71,457) | ($16,545) | ($12,108) |
| Cash – Period End | $414,904 | $563,565 | $641,925 | |
| Debt – Period End | $14,032 | $13,941 | $21,063 | |
| Shares Outstanding (Millions) | 237.6 | 237.6 | 237.5 |
Canoo is one of three EV manufacturers formed via the SPAC process — Nikola Corp. and Lordstown Motors Inc. are the other two — that are being investigated by the U.S. Securities and Exchange Commission (SEC). The SEC is probing Canoo’s “operations, business model, revenues, strategy, customer agreements, and earnings,” but Canoo notes that, “the investigation does not indicate that it has concluded that anyone has violated the law.”
Investors have regained the enthusiasm for the EV space that they displayed in the second half of 2020 and early 2021. Then, as now, any negative news was brushed aside as the market chose to adopt an optimistic, long-term view. This positive investor stance could persist for some time.
Canoo last provided forward-looking projections at its June 17 Investor Relations Day. At that time, Canoo projected that EBITDA could be around US$5.0 million in 2023. Assuming that figure still remains possible, it is difficult to square it with the company’s current enterprise value of about US$2.1 billion. The market is clearly valuing Canoo with a very long-tern perspective.
Canoo Inc. last traded at US$9.52 on the NASDAQ.
Information for this briefing was found via Edgar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
